Netflix Stock Continues Meteoric Rise

Wall Street bulls apparently couldn't buy shares of Netflix fast enough, sending the subscription video-on-demand’s stock up almost 17% Jan. 25 in heavy trading. This followed a 42% surge in valuation at market close Jan. 24.

The buying frenzy was in response to Netflix’s unexpected positive fourth-quarter fiscal results Jan. 23, underscored by 3.6 million new subs worldwide and $8 million profit.

It represents quite a turnaround from the summer/fall of 2011 when a 60% price increase to a popular hybrid streaming-disc rental program and short-lived spin-off of the by-mail disc rental service saw more than 800,000 subscribers depart and shares plummet more than 75% in value.

Perhaps reminiscent of that trying time when CEO Reed Hastings joked about hiring food inspectors to safeguard his meals, the co-founder downplayed Netflix’s Q4 results as being part of procedural process to restore the brand.

“It wouldn’t take much to have the issue flare up again for us to lose trust,” Hastings told analysts in a call. “So you might say we are on probation at this point.”

Indeed, Arvind Bhatia, analyst with Sterne Agee in Dallas, cautioned investors from “chasing the nstock at current levels,” saying in a Jan. 24 note that he believed much of the Netflix buying was being done by short-sellers. That said, Bhatia agreed Netflix had apparently improved its fundamentals.

Jayson Derrick, writing on SeekingAlpha.com, said investors would be foolish to jump on the Netflix bandwagon.

“There needs to be a ‘cooling down’ period before any new positions can be explored and additional news and announcements from the company are released,” Derrick wrote. “Until then, I am comfortable sitting on the sidelines waiting for an opportunity.”

Meanwhile, Jonathan Friedland, chief communications officer with Netflix, in a move that could either be called fortuitous or foolish, exercised stock options — before the Q4 fiscal disclosure — on more than 4,800 shares generating a return of more than $188,000, according to a regulatory filing.

Those shares, which were sold at values ranging from $98 to $101, reached more than $171 a share less than 48 hours later, or about $336,000 left on the table.